Aurora Loan Services, LLC, Respondent,v.Monique Taylor,, et al., Appellants, et al., Defendants.BriefN.Y.April 30, 2015APL-2014-00138 Westchester County Clerk’s Index No. 13735/10 Appellate Division, Second Department Docket No. 2012-04138 Court of Appeals STATE OF NEW YORK AURORA LOAN SERVICES, LLC, Plaintiff-Respondent, —against— MONIQUE TAYLOR a/ k /a Monique Pujol Taylor, LEONARD TAYLOR, Defendants-Appellants, NEW ROC PARCEL 1A, LLC, JOHN DOE, JOSEPH MALTESE, Defendants. BRIEF FOR DEFENDANTS-APPELLANTS IN RESPONSE TO BRIEF FOR AMICUS CURIAE d JEFFREY HERZBERG ZINKER & HERZBERG, LLP 300 Rabro Drive, Suite 114 Hauppauge, New York 11788 Telephone: (631) 265-2133 Facsimile: (631) 265-4233 Attorneys for Defendants-Appellants May 26, 2015 TABLE OF CONTENTS INTRODUCTION ......................................................................... 1 POINT I - AURORA DID NOT POSSESS A VALID AND ENFORCEABLE MORTGAGE LIEN ........................................................ 6 A. The Demise of the Principal .............................................. 11 B. Aurora Can Not Receive Any Greater Rights than the Assignor of the Mortgage Note ...................................................... 13 C. Miscellaneous Issues ....................................................... 16 D. The Separation of the Note from the Mortgage ........................ 17 E. The Mortgagee Would Still Have the Right to Sue on the Note ..... 20 F. Economic Ramifications ................................................... 21 CONCLUSION ............................................................................. 24 TABLE OF AUTHORITIES Cases Bank of America, N.A. v. Greenleaf, 2014 ME 89, 96 A.3d 700, 2014 Me LEXIS 97 (2014) ................................................................... 9 Ban1e of New York Mellon v. Gates, 116 A.D.3d 723,982 N.Y.S.2d 911, 2014 N.Y. App. Div. LEXIS 2339, 2014 NY Slip Op 2402 (2nd Dept., 2014) ................................................................................ 18 Barbarito v. Zahavi, 107 A.D.3d 416,968 N.Y.S.2d 422,2013 N.Y. App. Div. LEXIS 3866, 2013 NY Slip Op 3952 (1stDept., 2013) ................ 18 CWCapital Asset Mgt. LLC v. Charney-FFG 114 41 st Street, LLC, 84 A.D.3d 506,923 N.Y.S.2d453 (1stDept., 2011) ....................................... 16 CWCapital Asset Management, LLC v. Chicago Properties, LLC, 610 F.3d 497,2010 U.S. App. LEXIS 13229 (7th Cir. 2010) ........................... 20 CWCapital Asset Management, LLC v. Great Neck Towers, LLC, 99 A.D.3d 850, 953 N.Y.S.2d 89, 2012 N.Y. App. Div. LEXIS 6876,2012 NY Slip Op6911 (2nd Dept., 2012) .................................................. 16 Carpenterv. Longan, 83 U.S. 271,1872 U.S. LEXIS 1157,21 L.Ed. 313, 16 Wall. 271 (1872) ...................................................... 17, 18, 19 Certification from the United States District Court for the Western District of Washington in Bain v. Metropolitan Mortgage Group, Inc., 175 Wn.2d 83,285 P.3d 34,2012 Wash. LEXIS 578 (2012) ............................. 10 Colgate-Palmolive Company v. Erie Company, 39 A.D.2d 641,331 N.Y.S.2d 95, 1972 N.Y. App. Div. LEXIS 4857 (4th Dept., 1972) ...................... 2 Deutsche Bank National Trust Company, as Trustee v. Pietranco, 102 A.D.3d 724,957 N.Y.S.2d 868,2013 N.Y. App. Div. LEXIS 165,2013 NY Slip Op 171 (2nd Dept., 2013) ................................................ 5 Deutsche Bank National Trust Company v. Spanos, 102 A.D.3d 909,961 N.Y.S.2d 200,2013 N.Y. App. Div. LEXIS 682,2013 NY Slip Op 451 (2nd Dept., 2013), mot'n to appeal denied 21 N.Y.3d 1068,997 N.E.2d 140,974 N.Y.S.2d 315,2013 N.Y. LEXIS 2505 (2013) ........... 18 Farr v. Hardy, 14 N.Y.2d 183, 199 N.E.2d 369, 250 N.Y.S.2d 272, 1964 N.Y. LEXIS 1185 (1964) ................................................................. 2 Garcia v. Biro Manufacturing Company, Inc., 63 N.Y.2d 751,469 N.E.2d 534, 480 N.Y.S.2d 316, 1984 N.Y. LEXIS 4553 (1984) ......................... 3, 6 Hoffman v. Union Dilne Savings Institution, 109 A.D. 24, 95 N.Y. 1045, 1905 N.Y. App. Div. LEXIS 3480 (1stDept., 1905) ........................... 12 In the Matter of the Claim of Richardson v. Fiedler Roofing, Inc., 67 N.Y.2d 246,493 N.E.2d 228,502 N.Y.S.2d 125, 1986 N.Y. LEXIS 18049 (1986) ................................................................................. 3 Kings Medical Management, Inc. v. Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, P.C., 77 A.D.3d 626, 908 N.Y.S.2d 453, 2010 N.Y. App. Div. LEXIS 7241, 2010 NY Slip Op 7147 (2nd Dept., 2010) ................................................................................. 11 Kittner v. Eastern Mutual Insurance Company, 2011 NY Slip Op 74, 80 A.D.3d 843,915 N.Y.S.2d 666 (4th Dept., 2011) .............................. 14 Matter of the Estate of Stralem, 303 A.D.2d 120, 758 N.Y.S.2d 345 (2nd Dept., 2003) ................................................................................. 14 Merrittv. Bartholick, 36N.Y.44, 1867NYLEXIS ...................... 6, 18, 19 11ERSCORP v. Romaine, 8 N.Y.3d 90,861 N.E.2d 81,828 N.Y.S.2d 266, 2006 N.Y. LEXIS 3699 (2006) ................................................... 8 Mortgage Electronic Registration Systems, Inc. v. Saunders, 2010 11E 279, 2 A.3d 289,2010 Me. LEXIS 83 (2010) .................................... 8, 10 Persky v. Bank of America National Association, 261 N.Y. 212, 185 N.E. 77, 1933 N.Y. LEXIS 1275 (1932) ................................................... 2 Rice v. Ritz Associates, Inc., 58 N.Y.2d 923, 447 N.E.2d 58, 460 N.Y.S.2d 510, 1983 N.Y. LEXIS 2887 (1983) ............................................. 2 Sprint Communications Company, L.P. v. APCC Services, Inc., 554 U.S. 269, 128 S.Ct. 2531, 171 L.Ed.2d 424,2008 U.S. LEXIS 5034 (2008) ..... 20, 21 Stark v. Goldberg, 292 A.D.2d 257, 739 N.Y.S.2d 692, 2002 N.Y. App. Div. LEXIS 3055 (1 st Dept., 2002) ..................................................... 3 Stevens v. Sessa, 50 A.D. 547,64 N.Y.S. 28, 1900 N.Y. App. Div. LEXIS 1033 (2nd Dept., 1900) ............................................................. 12 Telaro v. Telaro, 25 N.Y.2d 433,255 N.E.2d 158,306 N.Y.S.2d 920, 1969 N.Y. LEXIS 934 (1969) ............................................................ 1 The Fanners' Loan and Trust Company v. Wilson, 139 N.Y. 284, 34 N.E. 784, 1893 N.Y. LEXIS 998 (1893) .................................................... 11 The Trustees of Union College v. Wheeler, 61 N.Y. 88, 1874 N.Y. LEXIS 622 (1874) ................................................................................ 14 U.S. Bank N.A. v. Alexander, 2012 OK 43,280 P.3d 936,2012 Okla. LEXIS 43 (2012) ................................................................... 10 US Bank National Association v. Weinman, 123 A.D.3d 1108,2014 N.Y. Apr. Div. LEXIS 9036, 2014 NY Slip Op 09119, 2 N.Y.S.3d 128 (2n Dept., 2014) ..................................................................... 6 Wells Fargo Bank Minnesota National Association v. Mastropaolo, 42 A.D.3d 239, 837N.Y.S.2d 247,2007 N.Y. App. Div. LEXIS 6686,2007 NY Slip Op 4626 (2nd Dept., 2007) .................................................... 5 Statutes and Regulations CPLR §3211 ............................................................................. 4 CPLR §5206 ............................................................................ 22 mCRR §500.23 ......................................................................... 1 RPAPL §1501 ................................ ~ .......................................... 17 RPL §291 ................................................................................ 15 Monique Pujol Taylor ("Monique") and Leonard Taylor ("Leonard") (Monique and Leonard are referred to herein in the aggregate as "Taylor"), by and through their attorneys, Zinker & Herzberg, LLP files this brief in opposition to the brief of amicus curiae MERSCORP Holdings, Inc. ("MERSCORP") and the Mortgage Electronic Registration Systems, Inc. ("MERS") (MERSCORP and MERS are referred to in the aggregate as "MERS") dated May 11, 2015 (the "MERS Brief'). Please note that May 11, 2015 was subsequent to the April 30, 2015 oral argument pertaining to this appellate matter. INTRODUCTION Much of the facts and issues set forth in the MERS Brief are inadmissible and are, in fact, prohibited by the provisions set forth NYCRR 500.23. NYCRR 500.23 provides in pertinent part: "a. Motions for amicus curiae relief. ( 4) Criteria. Movant shall not present issues not raised before the courts below." In interpreting the provisions of this rule, this Honorable Court stated in Telaro v. Telaro, 25 N.Y.2d 433,255 N.E.2d 158,306 N.Y.S.2d 920, 1969 N.Y. LEXIS 934 (1969) at 25 N.Y.2d at 433: "The rule was best stated in Cohn v. Goldman (76 N.Y. 284, 287): 'It is, indeed, a rule, that questions not raised at the trial court, which might have been obviated by the action of the court then, or by that of the other party, will not be heard on appeal as ground of error. And it is not uncommon for courts to pass over in silence exceptions not brought to their notice by . counsel. But we know of no rule which prevents counsel from urging, in an 1 appellate court, a point distinctly made and preserved at the trial court, because it has not been made to an intermediate appellate court." FaIT v. Hardy, 14 N.Y.2d 183, 199 N.E.2d 369,250 N.Y.S.2d 272, 1964 N.Y. LEXIS 1185 (1964) stated at 14 N.Y.2d at 187-188: "In addition, defendant's contention that his attorney's conflict of interest precludes the imputation of knowledge by him is made for the first time in this court. The argument was not made at the trial, and the evidence does not appear to have been introduced with that legal argument in mind. The memorandum decision of the Trial Justice does not advert to it, nor does the Appellate Division's opinion reflect concern with the attorney-client relationship beyond the finding that an agent's negligent failure to disclose relevant facts to his principal does not bar imputation of such knowledge when it is not of a confidential nature. On this state of the record it would be manifestly improper to now look at the evidence in a new light, draw an inference of duplicity therefrom, and then invoke the reasoning of the cases relieving a principal on that ground. The well-settled rule is that this court will not consider new arguments, whether of law or fact, or both, where it appears that if they had been raised at the trial an adequate defense might have been adduced by the other party." (Citations Omitted). And Persky v. Bank of America National Association, 261 N.Y. 212, 185 N.E. 77, 1933 N.Y. LEXIS 1275 (1932) stated at 261 N.Y. at 217: "We have said that 'it is well settled that this court will not, for the purpose of reversing a judgment, entertain questions not raised or argued at the trial, or upon the intermediate appeal. '" (Citations Omitted). Please see also Rice v. Ritz Associates, Inc., 58 N.Y.2d 923, 924,447 N.E.2d 58, 460 N.Y.S.2d 510, 1983 N.Y. LEXIS 2887 (1983). In fact, Colgate-Palmolive Company v. Erie County, 39 A.D.2d 641, 331 N.Y.S.2d 95, 1972 N.Y. App. Div. LEXIS 4857 (4th Dept., 1972) at 641: 2 "The Proctor and Gamble Company seeks, as amicus curiae, to introduce a new issue on this appeal, asserting that Local Law No.8 was not a valid exercise of any power delegated to Erie County at the time of its adoption, by reason of the State's having fully occupied the field of water pollution control to the exclusion of local legislation. As pointed out in New York Jurisprudence (vol. 3, Amicus Curiae, §3) an amicus curiae 'is not a party, and cannot assume the functions of one; he must accept the case before the court with issues made by the parties, and may not control the litigation. Nor may he ... introduce any issues; only the issues raised by the parties may be considered. '" (Citations Omitted). And, Stark v. Goldberg, 292 A.D.2d 257, 739 N.Y.S.2d 692, 2002 N.Y. App. Div. LEXIS 3055 (1 stDept., 2002) stated at 292 A.D.2d at 259: It is a settled rule of appellate practice that the Court is bound by the record, to which review is confined. As stated by the Appellate Division, Second Department, 'appellate review is limited to the record made at nisi prius and, absent matters which may be judicially noticed, new facts may not be injected at the appellate level". (Citations Omitted). Additionally, much of the factual information set forth in the MERS Brief are conclusive statements lacking any evidentiary support. Garcia v. Biro Manufacturing Company, Inc., 63 N.Y.2d 751, 469 N.E.2d 534, 480 N.Y.S.2d 316, 1984 N.Y. LEXIS 4553 (1984). Please note that this is not a situation where this Honorable Court is requested to address a question of statutory interpretation, whereby a new issue may be introduced on the appeal. In the Matter of the Claim of Richardson v. Fiedler Roofing, Inc., 67 N.Y.2d 246,230,493 N.E.2d 228,502 N.Y.S.2d 125, 1986 N.Y. LEXIS 18049 (1986). Accordingly, much of the factual information and one (1) particular issue set forth by MERS in the MERS Brief must be stricken and/or ignored as it seeks to 3 introduce facts that were not considered by the lower courts. Further, the issue as to the standing or right of Taylor to object to the standing of Aurora must similarly be ignored as it was waived, if even applicable. The striking includes much of the background information as to MERS and the potential economic ruination in the State of New York if Taylor prevails on the second issue in this appeal, which is purely speculative and without evidentiary support. A further recitation of the second issue will appear hereafter. And it should be further noted that much of the legal niceties of MERS, as nominee, mortgages as it is applicable in the State of New York was never addressed by MERS. Accordingly, among other places, much of the information set forth on pages 1 through 5, the first argument on pages 6 through 9, the second argument entitled "THE MERS SYSTEM (A) on pages 9 through 17 of the MERS Brief and the Affidavit of John A. Murphy in Support of Motion for Amicus Curiae Relief Allowing the Filing of an Amicus Curiae Brief sworn to on March 26, 2015 with accompanying MERS System Membership Agreement, must be ignored, stricken and not considered by this Honorable Court. One further point pertaining to MERS' argument that Taylor lacked standing to claim that the mortgage and/or mortgage assignment was invalid and unenforceable must be addressed. It is rudimentary that if a mortgagor fails to raise the standing issue as an affirmative defense in their answer and/or in a motion to dismiss pursuant to the provisions set forth in CPLR §3211, the standing defense 4 is waived by the mortgagor. Deutsche Bank National Trust Company, as Trustee v. Pietranco, 102 A.D.3d 724,957 N.Y.S.2d 868, 2013 N.Y. App. Div. LEXIS 165,2013 NY Slip Op 171 (2nd Dept., 2013), Wells Fargo Bank Minnesota, National Association v. Mastropaolo, 42 A.D.3d 239, 242, 837 N.Y.S.2d 247, 2007 N.Y. App. Div. LEXIS 6686, 2007 NY Slip Op 4626 (2nd Dept., 2007). Please see also page 11 of the Brief for Defendants-Appellants dated August 5, 2014. Herein, Aurora failed to raise the issue as to whether Taylor had standing to challenge the mortgage and/or assignment of mortgage instruments in the: (a) Supreme Court of the State of New York, County of Westchester, (b) Supreme Court of the State of New York, Appellate Division, Second Judicial Department; and/or (c) Court of Appeals. Accordingly, if the failure to raise standing by the mortgagor constitutes a waiver of the standing issue, the same should also hold true for the mortgagee, namely, the failure to raise the standing of the mortgagor in the initial pleading constituted a waiver by the mortgagee and/or MERS. The current appeal pertained to three (3) certain issues, namely: 1. Whether a mortgage assigned to Aurora nine (9) months prior and recorded with the Westchester County Clerk seven (7) months prior to the delivery of the mortgage is an enforceable and valid mortgage giving Aurora standing to commence and prosecute a mortgage foreclosure action? 2. Whether MERS, as nominee of First National Bank of Arizona or successors had the legal authority to assign the mortgage to Aurora and Aurora causing the recordation of the assignment of the mortgage with the Westchester County Clerk establishes the standing of Aurora, to commence and prosecute a mortgage foreclosure action when MERS never possessed the original mortgage note or an assignment of the original mortgage note? 5 3. Whether the affidavit proffered by Aurora should have been rejected as consisting of conclusive statements and lacking proof of the authenticity of the underlying mortgage note, causing the denial of the standing of Aurora to commence and prosecute a mortgage foreclosure action? MERS never addressed the first and third issues set forth above; it only addressed the second issue. Accordingly, Taylor will only briefly state that the first and third issues are based: (a) on the holding in Merritt v. Bartholick, 36 N.Y. 44, 1867 NY LEXIS 5 (1867) and its progeny of cases, that a transfer of the mortgage without a corresponding transfer of the mortgage note is a "nullity"; and (b) on the holding of Garcia v. Biro Manufacturing Company, Inc., 63 N.Y.2d 751, 469 N.E.2d 834, 480 N.Y.S.2d 316, 1984 N.Y. LEXIS 4553 (1984) and its progeny of cases, that conclusive statements as to the date of the receipt of the actual mortgage note will not support the granting of summary judgment in a mortgage foreclosure action. POINT I AURORA DID NOT POSSESS A VALID AND ENFORCEABLE MORTGAGE LIEN MERS, as nominee for the First National Bank of Arizona, did not possess a valid and enforceable mortgage lien as of the time of its assignment of the mortgage to Aurora. It is rudimentary that in order to foreclose a mortgage in the State of New York, the mortgagee must possess both the mortgage and the mortgage note as of the commencement of the foreclosure action. For example, US Bank National 6 Association v. Weinman, 123 A.D.3d 1108,2014 N.Y. App. Div. LEXIS 9036, 2014 NY Slip Op 09119, 2 N.Y.S.3d 128 (2nd Dept., 2014) stated at 123 A.D.3d at 1109: "In an action to foreclose a mortgage, the plaintiff has standing where, at the time the action is commenced, it is the holder or assignee of both the subject mortgage and the underlying note." (Citations Omitted). As was addressed in the Brief for Defendants-Appellants and the Reply Brief for Defendants-Appellants and as will be further addressed herein, a MERS, as nominee, mortgage is invalid and unenforceable to provide the ultimate holder of the mortgage assignment the requisite standing to foreclose the subject real property. The case at bar is a perfect illustration why MERS, as nominee, mortgages are invalid and unenforceable in the State of New York. Herein, MERS, as nominee for the First National Bank of Arizona, assigned the mortgage to Aurora approximately one (1) year after the 2008 demise of the former First National Bank of Arizona. The latter fact is set forth herein notwithstanding that Aurora received the mortgage assignment approximately nine (9) months and recorded the mortgage assignment with the Westchester County Clerk approximately seven (7) months prior to its physical receipt of the mortgage note; accordingly, at the time of Aurora's receipt of the mortgage assignment and recordation, Monique did not owe any moneys to Aurora notwithstanding its 7 recorded mortgage lien. As stated previously, MERS never addressed the first issue in the Taylor briefs. MERSCORP v. Romaine, 8 N.Y.3d 90,861 N.E.2d 81,828 N.Y.S.2d 266, 2006 N.Y. LEXIS 3699 (2006) merely held that the Suffolk County Clerk must accept the MERS, as nominee, mortgage for recordation; however, the Court of Appeals in MERSCORP v. Romaine did not determine the validity and enforceability of the MERS mortgage. Mortgage Electronic Registration Systems, Inc. v. Saunders, 2010 ME 279, 2 A.3d 289,2010 Me. LEXIS 83 (2010) stated at 2010 ME at 295: "The only rights conveyed to MERS in either the Saunderses' mortgage or the corresponding promissory note are bare legal title to the property for the sole purpose of recording the mortgage and the corresponding right to record the mortgage with the Registry of Deeds. This comports with the limited role ofa nominee. A nominee is a 'person designated to act in place [sic] benefit of others or who receives and distributes funds for the benefit of others.' (demonstrating the limited role of a nominee in a contract case). The remaining, beneficial rights in the mortgage and note are vested solely in the lender Accredited and its successors and assigns. The mortgage clearly provides that, by signing the instrument, the Saunderses were 'giving [the] Lender those rights that are stated in this Security Instrument and also those rights that Applicable Law gives to Lenders who hold mortgages on real property.' (Emphasis Added). Not one of the mortgage covenants in the document, including the Saunders' obligations to make timely payments on the note, pay property taxes, obtain property insurance, and maintain and protect the property, is made to MERS or in favor ofMERS. Each promise and covenant gives rights to the lender and its successors and assigns, whereas MERS's rights are limited solely to acting as a nominee. The Bank argues that MERS's status as a 'nominee' for the lender and as the 'mortgagee of record' within the document qualifies it as a 'mortgagee' within 14 M.R.S. §6321. We disagree. 8 As discussed above, MERS' s only right is the right to record the mortgage. Its designation as the 'mortgagee of record' in the document does not change or expand that right; and having only that right, MERS does not qualify as a mortgagee pursuant to our foreclosure statute, 14 M.R.S. §§6321-6325." (Citations Omitted). And Bank of America, N.A. v. Greenleaf, 2014 ME 89, 96 A.3d 700, 2014 Me LEXIS 97 (2014) stated at 96 A.3d a 707-708: "We have already analyzed this exact language in Saunders, 2010 ME 79, Para. 9, 2 A.3d 289. We concluded that, notwithstanding its reference to MERS as the 'mortgagee of record,' the mortgage in fact granted to MERS 'only the right to record the mortgage' as the lender's nominee, and 'having only that right, MERS [did] not qualify as a mortgagee pursuant to our foreclosure statute.' As in Saunders, despite the language in Greenleafs mortgage that suggests otherwise, Greenleaf s mortgage did not, as a matter of law, grant to MERS any right to foreclose on the property. Rather, the mortgage conveyed to MERS only the right to record the mortgage as nominee for the lender, RBS. There is also no evidence in the record purporting to demonstrate that MERS acquired any authority with respect to Greenleafs mortgage by any means other than that defined in the mortgage itself. When MERS then assigned its interest in the mortgage to BAC, it granted to BAC only what MERS possessed - the right to record the mortgage as nominee - because MERS could not grant to another person or entity any greater interest in the mortgage than that enjoyed by MERS. (stating that 'an assignee has no greater rights than his assignor'); ('[T]he assignee can have no greater right ... than his assignor. '). Likewise, through the certification that BAC merged with the Bank, the Bank established that it had obtained from BAC only that which BAC possessed - again, the right to record the mortgage as nominee. Nor did the Bank offer any evidence of any independent assignment of the mortgage from RMS to MERS, where the lender executed a separate assignment 'expressly transferr[ing] the right to enforce the note secured by the mortgage as nominee, but no more. In short, the record demonstrates a series of assignments of the right to record the mortgage as nominee, but no more. In the absence of any evidence that the Bank owned Greenleafs 9 mortgage, we conclude that the Bank lacked standing to seek foreclose on the mortgage and accompanying note." (Citations Omitted)(Footnote Omitted. Please also see Certification from the United States District Court for the Western District of Washington in Bain v. Metropolitan Mortgage Group, Inc., 175 Wn.2d 83, 285 P.3d 34, 2012 Wash. LEXIS 578 (2012). And U.S. Bank, N.A. v. Alexander, 2012 OK 43,280 P.3d 936,2012 Okla. LEXIS 43 (2012) stated at 2012 OK at 942: "The assignments purport to transfer not only the mortgage but also the note. However, these assignments are made by MERS, as nominee for MILA. Neither Oklahoma law nor the mortgage documents define the term 'nominee.' In the absence of contractual definition, the parties leave the definition to judicial interpretation. Black's Law Dictionary (9th ed. 2009) defines a nominee as '[a] person designated to act in place of another usu[ ally] in a very limited way.' (9th ed. 2009). 'This definition suggests that a nominee possesses few or no legally enforceable rights beyond those ofa principal whom the nominee serves.' Landmark Nat. Bank v. Kesler, 289 Kan. 528,216 P.3d 158, 166 (2009). By definition a 'nominee' is substantially the same as the definition of an 'agent.' The legal status of a nominee/agent, then, depends on the context of the relationship of the nominee/agent to its principal. MERS is only the nominee of the lender for purposes of the mortgage. Arguably, MERS may be able to assign the mortgage as nominee of the lender, but there is no evidence of authority for MERS to indorse the note." Accordingly, it is beyond peradventure that the highest court of many states have wrestled with the issue of MERS, as nominee, mortgages (please note that there are other states that have gone the opposite way which were cited by MERS). Please note that many of these jurisdictions were in non-judicial foreclosure jurisdictions as stated at Mortgage Electronic Registration Systems, Inc. v. Saunders at 2010 10 ME at PI3). But one thing is clear, as even agreed to by MERS, MERS procured only limited rights in its role as a nominee or an agent, i.e, the limited right to record the mortgage, especially as MERS never owned or possessed the mortgage note. A. The Demise of the Principal In New York, the rights of an agent typically ceases upon the death or demise of the principal. The Farmers' Loan and Trust Company v. Wilson, 139 N.Y. 284, 34 N.E. 784, 1893 N.Y. LEXIS 998 (1893) stated at 139 N.Y. at 286- 287: "The rule is well settled by authority that the power of an agent to collect and receive payment of rents falling due to his principal, when such power is not coupled with an interest, terminates and ceases upon the death of the principal, and that payment made thereafter to the agent does not bind the estate of the principal, though the payment be made in ignorance of the principal's death. The rule seems to have originated in the presumption that those who deal with an agent knowingly assume the risk that his authority may be terminated by death without notice to them. The case of an agency coupled with an interest is made an exception to the rule ... The interest which can protect a power after the death of the person by whom it was created, must be an interest in the thing itself. The power must be engrafted upon some estate or interest in the property to which it relates ... At no time could the agent act except in the name of the principal, and a power thus limited must necessarily cease with the death of the person in whose name it is to be exercised." Please see also Kings Medical Management, Inc. v. Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, P.C., 77 A.D.3d 626, 627, 908 N.Y.S.2d 453,2010 N.Y. App. Div. LEXIS 7241, 2010 NY Slip Op 7147 (2nd Dept., 2010), 11 Hoffman v. Union Dime Savings Institution, 109 A.D. 24, 25, 95 N.Y. 1045, 1905 N.Y. App. Div. LEXIS 3480 (1 st Dept., 1905), Stevens v. Sessa, 50 A.D. 547,548- 549, 64 N.Y.S. 28, 1900 N.Y. App. Div. LEXIS 1033 (2nd Dept., 1900). In the current matter, First National Bank of Arizona, the principal ofMERS ceased to exist in 2008, when it was taken over by the Federal Deposit Insurance Corp., and, merged with the First National Bank of Nevada. Similarly, the First National Bank of Nevada was also taken over by the federal bank regulators in 2008. Accordingly, the nominee relationship with MERS ceased to exist in 2008 when the First National Bank of Arizona "failed". And as stated previously, MERS, as nominee, had very limited powers as the nominee, i.e. the right to record the mortgage. MERS certainly never had an interest in the repayment of the mortgage loan moneys by Monique and, in fact, was never the holder of the mortgage note granted and delivered by Monique. Accordingly, MERS, as nominee, had no authority to assign the mortgage to Aurora by assignment dated August 13,2009 and recorded with the Westchester County Clerk on October 29,2009. This is in addition to MERS, as nominee, having no right to assign the mortgage to Aurora on August 13,2009 as Aurora did not possess the mortgage note on August 13,2009. The Affidavit of Sara Holland sworn to on December 12,2011 stated in pertinent part: "That the original Note 12 has been in the custody of Plaintiff Aurora Loan Services, LLC and in its present condition since May 20,2010." Accordingly, the MERS, as nominee, mortgage assignment was invalid and unenforceable for two (2) separate and independent reasons. They are as follows: (a) the demise of the First National Bank of Arizona prior to the assignment of the mortgage; and (b) the assignment of the mortgage taking place prior to Aurora's lawful right to receive and record the mortgage with the Westchester County Clerk. In the following paragraphs, Taylor will discuss a few other legal reasons why the MERS, as nominee, mortgage is invalid and unenforceable. B. Aurora Can Not Receive Any Greater Rights than the Assignor of the Mortgage Note The record is clear that First National Bank of Arizona assigned the mortgage note to the First National Bank of Nevada. The First National Bank of Nevada assigned the mortgage note to Deutsche Bank Trust Company Americas as Trustee. Then apparently, the Deutsche Bank Trust Company Americas as Trustee assigned the mortgage note to Aurora based on Ms. Holland's Affidavit. In all cases, the date of the assignment to the respective financial institutions was left "blank"; notwithstanding, the mortgage was always left in the name ofMERS, as nominee for the First National Bank of Arizona until its purported assignment to Aurora as discussed above. Accordingly, Deutsche Bank Trust Company Americas as Trustee lacked any rights in the mortgage. As stated previously 13 numerous times, in order to have standing to foreclose a mortgage, the financial institution had to possess both the mortgage and mortgage note as of the commencement of the mortgage foreclosure action. Herein, Deutsche Bank Trust Company Americas as Trustee did not possess the mortgage or an assignment of the mortgage and certainly did not have a recorded mortgage assignment. Upon a default in payment, Deutsche Bank Trust Company Americas as Trustee's sole remedy was to sue Monique on the note. It had no right to seek to foreclose the mortgage on the subject premises. It is rudimentary that an assignee can not receive greater rights in the assigned instrument than previously held by the assignor. The Trustees of Union College v. Wheeler, 61 N.Y. 88, 104-105, 1874 N.Y. LEXIS 622 (1874), Kittner v. Eastern Mutual Insurance Company, 2011 NY Slip Op 74 at *2, 80 A.D.3d 843, 844,915 N.Y.S.2d 666 (4th Dept., 2011), Matter of the Estate ofStralem, 303 A.D.2d 120, 122, 758 N.Y.S.2d 345 (2nd Dept., 2003). In sum, the assignee may only receive whatever rights that the assignor had in the property, namely the mortgage note. Aurora could not magically receive greater rights in the mortgage note than Deutsche Bank Trust Company Americas as Trustee previously had, namely the right to payment without any collateral securing the repayment of the moneys evidenced by the mortgage note. 14 And assuming arguendo that Deutsche Bank Trust Company Americas as Trustee had rights in the collateral, it was a mere unperfected right. In order to have a perfected mortgage relative to third parties, the mortgage had to be duly recorded with the County Clerk and the applicable recording fees paid. RPL §291 entitled: "Recording of conveyances" provides as follows: "A conveyance of real property, within the state, on being duly acknowledged by the person executing the same, or proved as required by this chapter, and such acknowledgment or proof duly certified when required by this chapter, may be recorded in the office of the clerk of the county where such real property is situated, and such county clerk shall, upon the request of any party, on tender of the lawful fees therefor, record the same in his said office. Every such conveyance not so recorded is void as against any person who subsequently purchases or acquires by exchange or contracts to purchase or acquire by exchange, the same real property or any portion thereof, or acquires by assignment the rent to accrue therefrom as provided in section two hundred ninety-four-a of the real property law, in good faith and for a valuable consideration, from the same vendor or assignor, his distributees or devisees, and whose conveyance, contract or assignment is first duly recorded, and is void as against the lien upon the same real property or any portion thereof arising from payments made upon the execution of or pursuant to the terms of a contract with the same vendor, his distributees or devisees, if such contract is made in good faith and is first duly recorded. Notwithstanding the foregoing, any increase in the principal balance of a mortgage lien by virtue of the addition thereto of unpaid interest in accordance with the terms of the mortgage shall retain the priority of the original mortgage lien as so increased provided that any such mortgage instrument sets forth its terms of repayment. Accordingly, a mortgagee must pay a recordation fee to have a perfected mortgage lien. And unless a mortgage assignment is duly recorded with the County Clerk, third parties remain unaffected by the mortgage assignment. In the current matter, there were third parties that may have held an interest in the subject property, 15 namely New Roc Parcel lA, LLC and Joseph Maltese (the latter parties were named as party defendants in the caption of the summons and complaint). In the case at bar, there is no evidence that any of the subsequent assignees of the mortgage note originated by the First National Bank of Arizona ever paid a recording fee to the Westchester County Clerk and, thus, never had a perfected mortgage lien as it relates to New Roc Parcel lA, LLC and Joseph Maltese. Therefore, the rights of these third parties can not be affected by the subsequent assignment of the mortgage by MERS, as nominee of the First National Bank of Arizona to Aurora and Aurora's mortgage foreclosure action. C. Miscellaneous Issues MERS also did not address that the identity of the owner of the mortgage note was never disclosed in the caption of the summons and mortgage foreclosure complaint for which Aurora was serving as the loan servicer. While a mortgage foreclosure action can be brought in the name of the mortgage servicer, the identity of the owner and holder of the mortgage note must be disclosed. CWCapital Asset Management, LLC v. Great Neck Towers, LLC, 99 A.D.3d 850, 851, 953 N.Y.S.2d 89, 2012 N.Y. App. Div. LEXIS 6876,2012 NY Slip Op 6911 (2nd Dept., 2012), CWCapital Asset Mgt LLC v. Chamey-FFG 11441 st Street, LLC, 84 A.D.3d 506, 507, 923 N.Y.S.2d 453 (1 st Dept., 2011). 16 Please note that the identity of the true owner of the mortgage note can be extremely important to insure that the mortgagor and/or third party sues the right party in case of dispute and/or action to clear title pursuant to the provisions of RP APL § 150 1. Without the identity of the true owner of the note, these parties can never sue the proper party in litigation. These are a few legal niceties that MERS never addressed in the MERS Brief. The following are some of the issues that MERS raised in the MERS Brief which needs comment. D. The Separation of the Note from the Mortgage MERS apparently concurs the mortgagee must have possession of the mortgage and the mortgage note as of the commencement of the case to foreclose the mortgage, but sticks to the adage that "the mortgage follows the note" citing among other authorities, Carpenter v. Longan, 83 U.S. 271, 1872 U.S. LEXIS 1157,21 L.Ed. 313, 16 Wall. 271 (1872). Carpenter v. Longan states at 83 U.S. at 274: "The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity." In Carpenter v. Longan, both the note and mortgage were duly assigned (83 U.S. at 272), unlike the current situation, where the note and mortgage travelled on divergent routes. Not only did the Supreme Court state in the second sentence of 17 the above-referenced quotation that a mortgage assignment alone is a nullity, Carpenter v. Longan further stated at 83 U.S. at 273: "The case is a different one from what it would be if the mortgage stood alone, or the note was non-negotiable, or had been assigned after maturity." Accordingly, the Supreme Court recognized that when a mortgagee permits or allows a mortgage to travel a divergent route from the mortgage note, then the mortgage does not necessarily follow the note and the mortgage is not an incident of the mortgage note. In the State of New York, Merritt v. Bartholick stated at 36 N.Y. at 45: "As a mortgage is but an incident to the debt which it is intended to secure, the logical conclusion is that a transfer of the mortgage without the debt is a nullity, and no interest is acquired by it. The security cannot be separated from the debt and exist independently of it." (Citations Omitted). Please see also Barbarito v. Zahavi, 107 A.D.3d 416,425, 968 N.Y.S.2d 422,2013 N.Y. App. Div. LEXIS 3866,2013 NY Slip Op 3952 (1 st Dept., 2013), Deutsche Bank National Trust Company v. Spanos, 102 A.D.3d 909, 911-912,961 N.Y.S.2d 200,2013 N.Y. App. Div. LEXIS 682,2013 NY Slip Op 451 (2nd Dept., 2013), mot'n to appeal denied 21 N.Y.3d 1068, 997 N.E.2d 140, 974 N.Y.S.2d 315,2013 N.Y. LEXIS 2505 (2013), Bank of New York Mellon v. Gates, 116 A.D.3d 723,982 N.Y.S.2d 911,912,2014 N.Y. App. Div. LEXIS 2339,2014 NY Slip Op 2402 (2nd Dept., 2014). Herein, the business model crafted by the residential mortgage loan industry caused an immediate separation of the note and mortgage, thereby allowing the note and mortgage to travel on divergent 18 routes. Herein, the note was granted by Monique to the First National Bank of Arizona and the mortgage granted and delivered by Taylor to MERS, as nominee for the First National Bank of Arizona. And notwithstanding the numerous assignments of the note, the mortgage always remained in the name ofMERS, as nominee for the First National Association of Arizona, until MERS, as nominee, assigned the mortgage to Aurora; which assignment took place at a point in time that Aurora had no right to receive and/or record the assignment of the mortgage with the Westchester County Clerk. Therefore: (a) the second sentence of the quotation from Carpenter v. Longan; (b) the quotation from Merritt v. Bartholick and the progeny of case law that follows thereof remains applicable, namely that: "An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity." Given that the mortgage traveled on a different path than the note, the mortgage and the related assignments of the mortgage are nullities. Therefore, the mortgages are invalid and unenforceable. Please note that there is nothing stated herein that prohibits the enforcement of the mortgage note, with the exception that borrowers may assert any defense that they would otherwise possess against the enforcement of a negotiable instrument, including the defenses set forth in the Uniform Commercial Code and a discharge in bankruptcy. 19 E. The Mortgagee Would Still Have the Right to Sue on the Note MERS argued on page 40 of the MERS Brief, that an assignee always has the right to enforce the rights of the assignor, citing among other cases, Sprint Communications Company, L.P. v. APCC Services, Inc., 554 U.S. 269, 128 S.Ct. 2531, 171 L.Ed.2d 424,2008 U.S. LEXIS 5034 (2008). Sprint Communications Company, L.P. v. APCC Services, Inc. held that an assignee of an assignor has the right to seek collection from a customer even if the assignee does not have the right to retain any part of the collection proceeds. Sprint Communications Company, L.P. v. APCC Services, Inc. pertained to unsecured collections from customers; the case never discussed the enforcement of collateral given to enforce the collection of moneys. In fact, Sprint Communications Company, L.P. v. APCC Services, Inc. stated at 554 U.S. at 284: "Similarly, in Titus v. Wallick, 306 U.S. 282, 59 S.Ct. 557, 83 L.Ed. 653 (1939), this Court unanimously held that (under New York law) a plaintiff, an assignee for collection, had 'dominion over the claim for purposes of suit' because the assignment purported to 'sell, assign, transfer and set over' the chose in action' to the assignee. Id., at 289, 59 S.Ct. 557, 83 L.Ed. 653. More importantly for the present purposes, the Court said that the assignment's 'legal effect was not curtailed by the recital that the assignment was for the purposes of suit and that its proceeds were to be turned over or accounted for to another.' Ibid." Please see also CWCapital Asset Management, LLC v. Chicago Properties, LLC, 610 F.3d 497,500-501,2010 U.S. App. LEXIS 13229 (ih Cir. 2010). 20 Herein, Taylor is not seeking to stop enforcement of the provisions of the note or the collection thereof; rather, it is claiming that the collateral granted and given to secure the collection of the moneys evidenced by the mortgage note given by Monique, is invalid and unenforceable. Additionally, MERS, as the assignee of the First National Bank of Arizona is not seeking to enforce the collection of the moneys evidenced by the mortgage note. In fact, MERS was never the holder of the mortgage note. And MERS was not and never was a party in this mortgage foreclosure action; MERS was never named as a party plaintiff in the caption of the summons and complaint. Rather, the plaintiff was always Aurora in its individual capacity. Accordingly, the undersigned counsel fails to see the relevance of the holding in Sprint Communications Company, L.P. v. APCC Services, Inc. to the facts in this appeal. Nothing stated therein, prevents or prohibits a declaration of the invalidity and unenforceability of MERS mortgages based on the mortgage foreclosure laws applicable in the State of New York. F. The Economic Ramifications MERS alleged that the avoidance of MERS mortgage liens would have a catastrophic effect on the mortgage and financial industry without any evidentiary support. The adverse economic effect on the mortgage industry may not be as harsh as MERS claimed. The financial institutions would still have the right to 21 commence suit on the mortgage note and cause a sale of the subject real property at a sheriff s sale. As part of the sheriff s sale, the financial institution will need to provide the homeowner, if the homeowner currently resides at the premises, their statutorily required homestead exemption in accordance with the provisions set forth in CPLR §5206(a). The amount of the homestead exemption varies depending upon the county where the mortgagor resides; it ranges from $150,000 per individual owner in the downstate counties, to $125,000 for Dutchess, Albany, Columbia, Orange, Saratoga and Ulster; and $75,000 for the remaining counties of the state. Accordingly, there may not be as large an adverse effect on the residential mortgage industry in the State of New York as complained by MERS. Additionally, other areas of the economy may benefit by a declaration that a MERS mortgage is invalid and unenforceable. Presumably, homeowners may have greater disposal income. Accordingly, the retail, service and manufacturing sectors of our economy may benefit by the added revenues that homeowners may have available to spend due to the amount of their homestead exemption. And communities throughout our state may be subject to a minimized number of abandoned homes decreasing the residents' property values and becoming eye- sores in the community, especially if the mortgagee decides not to seek an execution of the home as part of their judgment allowing homeowners to remain in their home. 22 It should be noted that MERS has not proffered any economic data that the states that have held that MERS mortgages are invalid and unenforceable, such as Maine, have suffered economically or that there is less mortgage moneys currently available. MERS has further not proffered admissible evidence to demonstrate that the ability to package mortgage loans into securitized pools by use of the MERS mortgage vehicle had increased and continues to increase the amount of mortgage loan moneys available. Rather, it appears that the only real beneficiaries of a declaration that MERS mortgages are valid and enforceable would be the trustees of the pools and possibly the investors thereof. And upon information and belief, MERS, as nominee, mortgages have not been made available in residential mortgage financing situations for the last several years in the State of New York and apparently residential mortgage moneys are still available. Accordingly, the supply of residential mortgage moneys will not be significantly impaired in the State of New York by a declaration of the invalidity and unenforceability ofMERS mortgages by this Honorable Court. And most importantly, if there is a detrimental effect on the mortgage industry, it was by its own making. The MERS system was created by the mortgage industry in an attempt to bypass the county clerk recordation system and to save the recordation fees. By attempting to saving the recordation fees with the 23 county clerks, they have cost themselves the premises as lawful collateral, especially relative to third parties. Conclusion For the reasons set forth in the Brief for Defendants-Appellants, the Reply Brief for Defendants-Appellants and this brief in opposition to the brief of MERS, Aurora never had standing to commence and prosecute the mortgage foreclosure action against the subject premises, and, accordingly, the mortgage foreclosure action must be dismissed. Dated: Hauppauge, New York May JI ,2015 ZINKER & HERZBERG, LLP Attorneys for Monique and Leonard Taylor By: eY~berg 300 Rabro Drive, Suite 114 Hauppauge, New York 11788 (631) 265-2133 24